The Link Between Productivity and Pay Is Very Much Alive, Summers Paper Finds
But a new study co-authored by Harvard University economist Lawrence Summers says that’s wrong. He and Anna Stansbury, a doctoral student at Harvard, found a strong and persistent link between hourly productivity and a variety of wage measures since 1973. The problem, they conclude, is that the positive influence of productivity on pay has been overwhelmed by other forces pushing the other way.
.. between 1973 and 2015, they found that a one-percentage-point increase in productivity growth generally led to a 0.5- to one-percentage-point increase in average or median pay growth, depending on the type of workers measured. Yet while productivity and wage growth tended to moved together over these short periods of time, there was enough of a difference in growth rates that over time a huge gap opened up between the pay and productivity. By 2015, productivity was up 73% from 1973 but wages were up just 12%.
.. they say other forces such as weaker unions were eating away at the ability of workers to share fully in the rise in productivity.
.. The late 1990s was one of the few times since 1973 when worker pay grew briskly, but that, he says, was probably because unemployment was around 4%, not because productivity was growing rapidly.
.. Productivity almost always grows faster than pay. “It’s a matter of whether you want to look at the glass half full or half empty,” Mr. Mishel says. “We’re saying it’s half empty, at best.”